The US Regulatory Side Effect, Tradehill Stops Bitcoin Trading

While the Bitcoin community is trying to adjust the new regulatory rules and scrutiny, things aren’t going as well as they used to. Government agencies are targeting Bitcoin traders and in a latest development Bitcoin exchange Tradehill has suspended its platform indefinitely.

Over the weekend, the exchange for virtual currencies such as Bitcoin, entered into a trading halt, temporarily freezing all trades while it deals with “banking and regulatory issues”. Through a statement on its website which gives little explanation of the reasons, Tradehill said that the decision was not made lightly, and that it regrets having to take such action.

“We have recently made the decision to temporarily suspend trading on the Tradehill platform, due to banking and regulatory issues. This decision has not been made lightly and we regret having to take such action,” the company said on its website. “However, we embrace the silver lining of our situation and plan to take this opportunity to upgrade, improve, and polish our trading platform.”

Many of you have come to know Tradehill over the last few months. The San Francisco-based stock exchange platform, founded in June 2011, was re-launched in March this year with a focus towards accredited investors. The Bitcoin digital currency exchange of choice was providing a reliable service to help you exchange currency in the Bitcoin market. The company received $400,000 in seed funding from angel investors and executed over $1 million in Bitcoin trades within its first month.

It should be noted that the Tradehill platform was registered with FinCEN this month and has been actively engaged with banks and regulators to further develop future products. IAFCU’s decision to terminate business with Bitcoin might lead to the suspension of the Tradehill services.

“Tradehill’s integration with IAFCU allowed for clients to buy Bitcoin with a balance in an account with their own name,” says Robin Kunimune, public relations manager at Tradehill. “This allowed clients to trade Bitcoin with funds that were stored in a federally insured institution.”

Tradehill informed users last week that all their accounts would be transferred to a U.S. credit union to make it easier to complete transactions.

“Inconsequential, in the grand scheme of things,” says Mark Hopkins, founding editor of SiliconANGLE. “They’ve been such a low volume market for a while that they’re not even publicly indexed by the market chart-makers. This will have little to no effect on the overall BTC market other than to increase volume on other exchanges.”

The regulatory behaviors of the US will potentially affect a lot of different Bitcoin products in the US, but the sale, trade, and exchange of Bitcoins is an international property that extends beyond the US and across the world. As a result, if BTC companies flourish elsewhere regulation will have to be drawn along to actually address them in a positive way.

The Bitcoin market right now is filled with exchanges, trading, businesses, all of them are building out their niches and Tradehill hasn’t been on the ball. Certainly, regulatory questions will plague anyone who wants to enter into the market; however these are being sorted out by the Bitcoin cognosenti.

If anything, dead-wood and projects who haven’t put much thought into their presence in the community going away is a necessary and good thing.

[Editor’s Note/Update: Updated with quotes from analyst and better coverage of subject matter/editorial.]